Use the data in Exercises 6-5 and 6-6 to construct comparative income statements for Car Armour (year-end December 31, 2020), similar to those shown in Exhibit 6.8 in the chapter. Assume that operating expenses are $1,250.

1. Which method results in the highest profit?

2. If costs were rising instead of falling, which method would result in the highest profit?

Exercise 6-5 and 6-6

Car Armour sells car wash cleaners. Car Armour uses a perpetual inventory system and made purchases and sales of a particular product in 2020 as follows:

Exhibit 6.8

Transcribed Image Text:

Unit Cost Description Units $40 Mar. 1 Beginning Inventory 15 $45 Mar. 3 Purchase 60 Mar. 6 110 $50 Purchase Mar. 17 Sale 55 Mar. 23 $50 Purchase 50 Mar. 31 Sale 140 Lifetime Equipment Co-op Income Statement-Mountain Bikes For Month Ended August 31, 2020 Moving Weighted Average Specific Identification FIFO Sales. $4,760 $4,760 $4,760 Cost of goods sold 3,535 3,568 3,562 Gross profit from sales. $1,225 $1,192 $1,198 Operating expenses.. 374 374 374 Profit from operations. $ 851 $ 818 $ 824 "From Exhibit 6.7 Partial Balance Sheet Assets Current assets: Merchandise inventory". $1,265 $1,232 $1,238 "From Exhibit 6.7